Is it too late to buy Airbnb stock?

Airbnb (ABNB -5.07%) released its first-quarter earnings report on May 3. Revenue for the short-term rental platform rose 70% year-over-year to $1.51 billion, beating analyst estimates of $60 million.

Its net loss fell from $1.17 billion to just $19 million, or $0.03 per share, well above analysts’ expectations of $0.27. Its adjusted earnings before interest, tax, depreciation and amortization (EBITDA) of $229 million improved from a loss of $59 million a year earlier, and also marked the first time its adjusted EBITDA from first quarter turned positive.

These numbers are impressive, but investors might wonder if it’s too late to buy Airbnb at these levels. The stock is still trading at 13 times this year’s sales and remains around 130% above its initial public offering (IPO) price. This price has remained more or less stable over the past three months, even as rising interest rates and other macroeconomic headwinds have ravaged higher-growth tech stocks. Let’s dig deeper into Airbnb’s business to see if it’s still a worthwhile investment.

Image source: Airbnb.

How fast is Airbnb growing?

Airbnb’s revenue fell 30% to $3.4 billion in 2020 as global travel came to a halt during the pandemic. But in 2021, its revenue jumped 77% to $6 billion as those headwinds faded. This post-lockdown recovery follows its year-over-year growth in booked room nights and experiences, gross booking volume (GBV), and total revenue over the past year:

Metric

% growth (year on year)
Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022

Nights and experiences

13%

197%

29%

59%

59%

GBV

52%

320%

48%

91%

67%

Total revenue

5%

299%

67%

78%

70%

Data source: Airbnb. YOY = year after year.

Airbnb’s post-lockdown recovery has made it a more attractive investment than other pandemic-era growth players like e-commerce, remote working and food delivery businesses, which are now facing… difficult year-to-year comparisons.

Airbnb’s business model is also well protected against inflation. Budget-conscious travelers will likely stick to its short-term rentals instead of more expensive hotels, while hosts will routinely rent out their properties to generate more passive income. Contrary to UberTechnologies and Lyft, Airbnb is not exposed to rising fuel and labor costs. All of these assets protected him from being sold off in the tech sector.

Growth in net income stabilizes

In 2020, Airbnb posted a huge net loss of $4.6 billion and a negative EBITDA of $251 million. But in 2021, the net loss narrowed to $352 million and the company generated positive adjusted EBITDA of $1.6 billion. Adjusted EBITDA margins have also remained positive for five consecutive quarters:

Metric Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022

Net Income (Millions)

($1,172)

($68)

$834

$55

($19)

Adjusted EBITDA margin

(7%)

16%

49%

22%

15%

Data source: Airbnb.

Airbnb’s robust revenue growth and stabilizing margins boosted its free cash flow (FCF) 146% year-over-year to a record $1.2 billion in the first quarter. Its total cash, cash equivalents, marketable securities and restricted cash also rose 41% to $9.3 billion.

Pink outlook for the rest of the year

Airbnb expects revenue to grow between 56% and 64% year-over-year in the second quarter. The estimate comes even as Russia’s invasion of Ukraine continues to disrupt travel to Europe. In fact, the company pointed out that many users had booked Airbnb rentals in Ukraine after the conflict began, even though they had no intention of going there, in order to give the hosts money. Ukrainians.

As a result, approximately 600,000 nights were still booked in Ukraine during the first quarter for a total GBV of $20 million. This was only 0.1% of its total GBV, but it shows how Airbnb can overcome geopolitical conflicts in less conventional ways than traditional hotel chains.

At the end of April, Airbnb had already booked 30% more nights for the summer season compared to the same period in 2019, and said its growth compared to this pre-pandemic year was “even higher as we look further this year. He also claims his customers are “booking more than ever” and staying longer at his properties.

As a result, analysts expect Airbnb’s revenue and adjusted EBITDA to grow 38% and 50% respectively in 2022. They also expect Airbnb to generate net income of 1.21 billion dollars in a full year.

It’s not too late to buy Airbnb

Airbnb has been a reliable investment over the past few months as it is able to weather many macro headwinds without facing significant macro headwinds.

It still faces regulatory challenges and competition from cheaper hotels and traditional online travel agencies, but its growth rates indicate it is weathering those challenges. Airbnb has now become synonymous with short-term rentals, and this brand recognition could ensure that it remains an attractive alternative to traditional hotels for many years to come.

Its stock may seem a bit pricey right now, but I think investors who accumulate more stock today will be well rewarded in the future.

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